Markets rose substantially at the end of the day, in part led by the strong earnings reports from 5 of 30 DJIA components this morning alone. This was despite the discussions of the risks of the US's Triple-A rating, another drop in home prices, and despite weekly jobless claims heading higher.

Here were today's unofficial closing bell levels:

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More consumers are being lured away from pricier eateries by fast food joints and a bevy of ready-made meals in their local grocers that need nothing more than a quick 20 minutes in the oven. And it's taking a big toll on higher-priced chains such as Cheesecake Factory (NASDAQ: CAKE).

CAKE has seen its fortunes slip along with the economy, and it's been a perfect storm of bad news for some time now.

First it was high food and gasoline prices that initially crushed the stock. Customers began worrying about filling their SUVs instead of dining out. At the same time, high input costs shrank restaurant margins.

This post is part of my series featuring established companies and the smaller, more aggressive or innovative rivals that may eventually succeed them.

Applebee's is the largest casual dining restaurant chain in the United States, with nearly 2,000 units spread out over 49 states. Applebee's changed its formal name back in 1986 to Applebee's Neighborhood Bar and Grill to give it a local appeal. In November 2007, International House of Pancakes -- IHOP -- now formally known as DineEquity, (NYSE: DIN) bought out Applebee's for $2.1 billion. It's hard to imagine Applebee's and IHOP as DineEquity!

The casual dining sector is embracing a newer player with aspirations of a national roll out. That player is BJ's Restaurant and Brewery (NASDAQ: BJRI) based in Huntington Beach, California. BJ's offers an on-site brewery with its own beer recipes or a trusted third party's recipe.The chain serves gourmet salads, steaks, chops, fish, poultry and several other popular dishes. It also makes superb deep-dish pizza for both in-house dining and carry out.

BJ's has 72 units in the chain spread over 13 states with enormous room to grow. Being a California-based company, BJ's stronghold is California, but the concept has become popular in key restaurant markets like Florida and Arizona. The casual nature of the chain has an appeal in many large markets not yet penetrated. BJ's has yet to open a unit in New York, Pennsylvania, Illinois, Georgia or Tennessee.

Despite the fact that Ruby Tuesday Incoroprated (NYSE: RT) serves up a mean burger, consumers continue to sit at home digesting more and more negative economic news. The company recently released third quarter (3Q) 2008 earnings that take away the appetite. 3Q 2008 net income was $11.7 million or $0.23 EPS, compared to 3Q 2007 net income of $28.7 million or $0.49 EPS. Same location sales declined 12-13%. Company expansion was flat with 6 new locations replacing 6 closed locations.

To be fair, some of the decline in customer traffic was due to a company-wide remodel of many locations. The company spent $25 million in 3Q updating its facilities and its menu, with plans to double that amount in the coming year in order to help Ruby Tuesday stand out from its bar and grill competition. Let's hope the remodel woos customers back into its restaurants. The company is renegotiating its existing debt covenants, and controlling advertising expenditures and other costs. CEO Sandy Beall hopes these initiatives will "set the stage for future profits."

FY 2008 guidance is not encouraging. The company expects sales to continue to decline 9-10%, leading to diluted EPS in the $0.40-$0.50 range. The stock jumped 5% on Thursday when 3Q earnings per share (EPS) beat estimates by $0.05, but has since dropped off 2% to trade at just around $8 per share.

Carrols Restaurant Group (NASDAQ: TAST) owns a number of Burger King, Pollo Tropical and Taco Cabana restaurants. Unlike many restaurant chains, Carrols posted a profit in both 4Q and FY2007, based in large measure on same store sales increases of 4.6% in its Hispanic Brands restaurants. The company posted these gains despite rising commodity and labor costs and a weakening Florida economy where many of its Hispanic Brands restaurants are located.

4Q revenues increased 4.5% overall, driven by revenue increases of 5.6% in its Hispanic Brands locations. FY2007 revenues increased 5.1% to $789.4 million driven by the same factor. This was enough to generate a $2 million increase in net income to $15.1 million or EPS of $0.70. CEO Alan Vituli anticipates 2008 revenue growth at 5-6%, which translates into diluted EPS in the 70 to 75 cents range. The company has kept expenses under tight control in order to use cash generated to open 17-23 new locations in 2008.

It's not a fancy business, but the stock currently trades at $7.50 and may be worth a look for investors who want to get a piece of action on a budget.

A fund affiliated with restaurant super-investor Nelson Peltz has acquired a 14% stake in Cheesecake Factory (NASDAQ: CAKE), sending shares of the dining chain up 10% on Wednesday.

The company said that it "has had a preliminary conversation with Triarc (Pelz's firm) already, and looks forward to continuing that dialogue."

According (subscription required) to the Wall Street Journal, "Mr. Peltz has bought stakes in several other restaurant and food companies, including Wendy's International Inc.(NYSE: WEN) and H.J. Heinz Co (NYSE: HNZ). At those companies, he has pressed directors and executives to sell brands, increase marketing or otherwise change their strategies in an effort to raise their stock prices. Mr. Peltz has said he prefers to work with existing management to effect change, though in the past his involvement has prompted reshuffling of company management and boards."

Cheesecake Factory has struggled to provide investors with strong returns over the past few years, and was scraping a multi-year low before the Petlz announcement sent the stock up.

The casual dining sector has been hit hard these past few several quarters, not as hard as mortgage lenders and home builders, but hard nonetheless. Consumers are squeezed between rising energy and fuel costs and a drumbeat of negative financial news. Dining out may not be high on many consumers' to-do list.

California Pizza Kitchen Incorporated (NASDAQ: CPKI) is not immune to the impact of these factors. Despite the fact that recently (Aug 9) released 2Q 2007 earnings were overall good, the stock continues to drop from $25 and change in May to $19.28 on 27 August. Analysts had predicted EPS of $0.22 and the stock posted earnings of $0.21, hardly a reason for the stock to fall into disfavor. The numbers tell a much more positive story. Total revenue increased 16% to $158.6 million. Comparable restaurant sales increased 5.4% by total volume, while average weekly sales at the 200+ current restaurants increased almost 5% to $68,535. Some of this increase was due to menu price increases to keep pace with raw material price increases, but some was due to an increase in the number of customers.

There is no denying that margins are tight in the casual dining sector. But California Pizza Kitchen does expect to post modest EPS of $0.03-0.04 in 3Q 2007. Given that small amount, it is difficult to believe FY guidance of $0.58-$0.62 diluted EPS. Management must be planning on a dynamite 4Q 2007.

The company remains optimistic. It opened four new locations with affiliates in 2Q, including a location in Hong Kong, and plans to add six more locations in 3Q. In June, the company granted a third-for-two stock split and is in the midst of a $50 million stock buyback program. The company plans to expand its line of California Pizza Kitchen frozen pizzas to capture a larger slice of the at-home pizza consumer.

Want to hold a small but interesting stock that is rather thinly followed by analysts? Try Texas Roadhouse, Inc. (NASDAQ: TXRH), a casual dining steakhouse that features in-house meat cutting. Pick your own steak and watch it being cooked just for you. All the home-made bread you can eat. Throw your peanut shells on the floor. Average meal price is $14.00. Texas Roadhouse currently has 250 restaurants in 43 states, with plans to open another two dozen before the end of 2006. In addition to steaks, the menu also features beef ribs, pork and chicken. Carnivores rule here.

Texas Roadhouse went public in 2004. The stock split 2:1 on September 26, 2005. Shares have slowed a bit since then. Senior management made a presentation on September 19, 2006 at Bank of America's 36th Annual Investment Conference in San Francisco. Highlights of the presentation are: $600 million in total revenues for 2006. Income from operations is forecast to exceed $55 million (I said it was a small company). Earnings per share should be in the 39-43 cents range. Average per restaurant sales volume for 2006 is forecast at $4 million. Sames stores sales growth is modest at 2-3%.

Currently, Texas Roadhouse serves dinner during the week, but expands to include lunch as well as dinner on weekends. Restaurant stocks are notoriously fickle investment vehicles, but Texas Roadhouse compares favorably with its closest competitors, Outback Steakhouse and TGI Fridays.

TXRH closed at $13.53 on September 19, 2006, up 3 cents per share. 798,041 shares traded hands.

[Photo The Jamoker]